With increasingly new specialty drugs (e.g. for Cancer, Crohn’s Disease, etc.) arriving on the market, rising cost of prescription drugs and the aging population, employers are concerned about sustaining their benefits plan in the event a staff member or their dependants require costly treatment.
Approximately 1 in 3 claimants have drug expenses over $1,000 and 1 in 25 claims cost more than $5,000 (source: Great-West Life). Remicade, a highly effective but costly drug for Rheumatoid Arthritis and Crohns, can cost up to $50,000 per year.
Costs this high would have a significant financial impact on an employee benefits plan (especially small to medium-sized business) and could potentially force employers to significantly revise their plan, increase employee cost-share, cancel coverage altogether, or a combination of any of these.
The Canadian Life and Health Insurance industry has just announced a pooling arrangement whereby Canadian insurance carriers are banding together to share the risk of expensive drugs. This pooling arrangement ensures that people who require costly treatment will continue to receive it while ensuring that employers can continue to afford to offer a benefit plan to employees, in a competitive group marketplace.
How will it work?
- Participating insurance carriers will adhere to basic standards to prevent carriers from charging higher premiums for pooled high-cost drug claims.
- In the event an employer/employee plan has a high-claiming drug expense, the insurance carrier will pay the expense from the collective pooling arrangement (vs. having it impact employers plan usage and ultimately premiums).
- This provides protection for employer-sponsored fully insured drug plans while ensuring high-quality care for employees and dependants.
Some other key things to know about this new industry-wide drug initiative include:
- Only claims that exceed $50,000 per year and are recurring are funded through this initiative. One-time high claims do not fall under this program.
- Plus, to be funded under this program, the claims over $50,000 must continue for two years in a row with a minimum cost of $25,000 in year three. For claims that start and stop within the first two years, the employer’s insurance carrier will pay for the expense as per the usual policy agreement – the industry-wide agreement does not apply.
- These funding changes will be completely transparent to the employee making the claim. It will all happen behind the scenes between the pharmacists and insurance carriers.
Many details are still being worked out amongst all the insurance carriers. So, please stay tuned for more information.
For more information about this initiative, please visit Canadian Life and Health Insurance Association Inc. or contact ENCOMPASS.
In addition to industry-led initiatives, your employees can also help keep drug costs down.
